The twin shocks of the war in Ukraine and the build-up of momentum in elevated US and Europe inflation will lead to a recession in the US and a growth recession in the euro area within the next two years, according to Deutsche Bank Research’s latest World Outlook. The war has disrupted activity on a number of fronts including upheavals in markets for energy, food grains, and key materials, which have in turn further disrupted global supply chains. The report from David Folkerts-Landau, Chief Economist and Global Head of Research and Peter Hooper, Global Head of Economic Research, assumes that the critical flow of gas from Russia to Europe will not be cut off, keeping the crisis from substantially deepening costs to the European and global economies, but that remains a downside risk. Inflation in the US and Europe is now pushing 8%, well in excess of what was expected as recently as December. More troubling, especially in the US, are signs that the underlying drivers of inflation have broadened, emanating from very tight labor market conditions and spreading from goods to services. The forecast is for inflation to recede to more desired levels over the next several years assuming there are no other geopolitical or other supply shocks and that central banks take action, just in time, to keep inflation expectations anchored. Should these assumptions prove incorrect, inflation pressure, central bank tightening, and economic downturns could all be more intense than baseline projections. Read the full World Outlook report here here and related research on the US Economic Outlook here here . Both available to clients of Deutsche Bank Research. For important disclosure information please see: https://research.db.com/Research/Disclosures/Disclaimer https://research.db.com/Research/Disclosures/Disclaimer